Someone finally said it. Caterpillar, even after losing a third of its value over the past two years, isn't done falling yet. And there's not much the company can do about it.

David Einhorn, who runs the hedge fund Greenlight Capital, revealed Wednesday at the Sohn Investment Conference in New York that he's betting against Caterpillar, the $43 billion maker of construction and mining equipment that's been grappling with a commodities bust.

“The market thinks CAT’s business is at the bottom and poised for recovery, so the shares trade at a fancy multiple of perceived trough earnings. But is it really at or near trough?"

Einhorn isn't the first bear to roam Caterpillar -- Jim Chanos, who predicted the collapse of Enron in 2001, has long bet against the company, and short interest this year has been the highest since the U.S. recession in 2009. But the fact that long investors were just starting to call the bottom for Caterpillar is what makes Einhorn's timing and comments so striking.

Bears Attack CAT

Analysts see only about 6 percent downside from Caterpillar's closing price Wednesday. According to Einhorn, it's more like 50 percent, so he's taken a short position.

Source: Markit, Bloomberg

The hedge fund manager predicts Caterpillar shares will drop by half alongside a tumble in prices of natural resources, such as coal and iron ore. Caterpillar closed at $74.24 on Wednesday, when the analysts' average price target was $69.53. But analysts, the majority of which now have "hold" ratings, have mostly been wrong about this stock. The exceptions are Macquarie and Atlantic Equities, which have been bearish on Caterpillar throughout 2015 and this year. (Investors don't seem to be taking Einhorn's warning seriously though. The stock fell only about 1 percent as of midday Thursday, and remains well above its 52-week low.)

Who's Right?

Will Einhorn's prediction play out? Or are analysts correct in thinking things aren't quite that bad?

Source: Bloomberg

Last summer, after Republican presidential hopeful Donald Trump began using Caterpillar to illustrate his point that the U.S. is losing out to foreign competitors, I wondered whether it was time for an activist shareholder to apply pressure and bring new ideas to the company. Was there more that Chairman and CEO Douglas Oberhelman and his team could be doing? Deeper cost-cutting measures? Further inventory reduction? Bloomberg Intelligence had highlighted how Caterpillar's inventory days -- or the time it holds onto machinery before being able to sell it -- were at the highest since 2013 (and still are). Debt also surged after the $8.6 billion takeover of Bucyrus in 2011 and now stands at $38.4 billion, nearly as high as Caterpillar's market value.

Debt Burden

Maintaining its dividend and a strong balance sheet are top priorities for Caterpillar. But the dividend may not be able to grow at the fast rate it has the past few years, and buybacks may need to be put on hold.

Source: Bloomberg

In April, Moody's changed its outlook for Caterpillar to negative from stable, saying that weak demand will probably extend into next year. The defense Caterpillar bulls have maintained is that it operates in a cyclical industry and so the company is prepared to weather such storms. But this time, things might be different. Note this line in the Moody's report: "Caterpillar has a long history of successfully contending with cyclical downturns, but the current falloff will be the longest and most severe in the company's history."

While last month's quarterly results presented a tiny bit of optimism at the sight of recent increases in commodities prices and signs of improvement in China's construction equipment demand, Caterpillar also tempered investors' expectations. "It's not a boom," Oberhelman warned, and the company lowered its earnings forecast for the year to $3 a share (or $3.70 excluding restructuring costs) down from $3.50 a share (or $4 excluding restructuring costs). Einhorn predicts it will fall much further, to $2. And analysts see free cash flow plunging another 25 percent this year.

As tempting as it may be to hope the worst is over for Caterpillar, the evidence still points in bears' direction.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

By the way, Caterpillar really dug itself a hole with that deal. It took a company that was mostly tied to construction, a market that's been recovering, and transformed it into one with large exposure to mining. Just in time for the end of the commodities supercycle. It would be better off without that merger, but at the same time, it can't undo it -- the business would sell for far less than Caterpillar paid for it.